Pension and Provident Preservation Funds:
Previously SARS did not have a definition for a Preservation Fund. According to the recently published draft Revenue Laws Amendment Bill, Preservation Funds may now be approved as Preservation Funds as long as they amend their rules accordingly by the 30th of September 2008.
The new bill has also changed the following:
Transfers to and between Preservation Funds no longer require an employer/employee relationship.
The options available to beneficiaries at the death of the member have been increased. Previously the beneficiary was only allowed to take cash payment within six months of the death of the member. Now, when a member of a pension preservation fund dies, the dependants/nominees can choose to receive the death benefit as an annuity or a lumpsum payment. If no dependants are found and no beneficiaries were nominated the death benefit can now be paid to the deceased member’s estate as a lumpsum.
Transfers of divorce benefits to Preservation Funds.
A non-member spouse is now able to transfer the pension interest allocated to him/her in terms of a divorce order to a Preservation fund of his/her choice.
Retirement age of a member.
Members no longer have to retire from the fund on the first day of the month in which they turn 70 years old. A member’s retirement date will depend on the rules of the fund.
The rules of most funds have been changed to have an open-ended retirement date.
Retirement Annuities:
The options available to beneficiaries at the death of the member.
Previously when a member of a retirement annuity fund died, the beneficiary was only allowed to take a maximum of 1/3rd of the death benefit in cash within six months of the death of the member.
Now:
When a member dies the dependants/nominees can choose to receive the death benefit as an annuity or a lumpsum payment. The maximum cash amount of 1/3rd and the maximum period of six months have been removed.
The death benefit can now also be paid to the deceased member’s estate as a lumpsum if no dependants are found and no beneficiaries have been nominated.
Retirement of a member.
Members no longer have to retire from the fund on the first day of the month in which they turn 70 years old. A member’s retirement date will depend on the rules of the fund.
Emigration.
Members who emigrate can now withdraw their full benefit and do not have to wait until their retirement date to access their benefit in the retirement annuity fund. However, the full benefit is taxable.
